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How to manage DIY suppliers when are there too many of them

2021 / Jan / 19

In general, things surpass management when they are excessive or unnecessary, but when they occupy, for various reasons, a place that is supposedly irreplaceable, which does not line up with reality.

An excess of suppliers puts the company in this position, and the following question arises:

When does the number of suppliers exceed real needs and become a burden?

When a purchasing manager faces the task of creating a supplier contact list from scratch, an adventure of epic proportions begins. When the focus is on seeking suppliers for expansion, it is still an adventure, but one of smaller proportions.

Now, when we are talking about finding a supplier that will extend the range or the catalogue, or that will be a temporary replacement that could end up being permanent, it is still an adventure, but the proportions can vary.

There are risks in all three of these cases, and you can end up working with "just in case", "so we don't fall short" or "because other companies have this supplier contact list", and so on, forever. A well-managed purchasing department is not defined by the number of suppliers that it manages, but by the results that the best, the "five star” ones, achieve. The "Five star” suppliers are: reliable, compliant, innovative, versatile and balanced in terms of the relationship between the service they offer and the price they charge for it.

It is also true that, in the three cases cited above, there is one factor that does not change; the adventure. While it is true that a little adventure adds excitement to a business’s journey, it is also true that too many unnecessary risks can lead to a "the end" that is as unexpected as it is undesirable.

The right ones stand out.

How do you find the exact point? How do you find a balance and have just the right number of DIY suppliers?

The first thing to do is to clarify, as far as possible, what a "five star" DIY supplier looks like. It is true that they are not a part of the company, at least not in the same way as any other employee.

It is also true that there is an essential requirement that needs to be met. They must meet the reliability expectations that the company, which counts on them, has placed on its services in order to consider them compliant.

It is also true that the "five star" supplier must be engaged in a cycle of constant innovation, almost in a spiral, in order to be on top of design and material trends.

They must also be on the ball in terms of logistics and delivery service, and its products must be presented impeccably. All this is true, but it must not become an obsession, as the search for the very best suppliers can become a trap that drives purchasing managers to make endless lists, as they want to be sure not to miss anything.

So how do you avoid falling into that obsession that drives you to keep expanding and expanding your supplier contact list until, obviously, by a basic principle known as the laws of physics, it explodes? How do we know whether or not we are going overboard on our DIY supplier list?

There are certain signs that, both on their own and when they come together, make it very clear to us that it has become truly outrageous.

The selection criteria of the purchasing department is one of these signs.

The purchasing department operates, in that sense, on a non-operational continuum. This is its natural state, with no drama.

Instability is the definition of any self-respecting purchasing department, controlled instability, of course. This is achieved with an appropriate combination of risk and moderation, a fifty-fifty split, with both at the same time.

To avoid getting dizzy, we could define it as "positive instability".

A purchasing department that is managed with "positive instability" is flexible, dynamic and demanding; three essential factors for finding "five star" sales suppliers. This also enables them to not get stuck in the comfort of an contact list that is monotonous and stable, but which ends up scaring customers away from its restraint, normality and lack of adventure. There are customers who need those stand out suppliers, the right ones.

Well, let's take it one step further. Let’s say the department has managed to incorporate the team of “five-star” suppliers you wanted. They're already on the contact list, they've been chosen.

How can you tell if it has got out of hand and, for a variety of reasons, they have included a wide range of suppliers in quantitative terms, incorporating more than they need?

Very simply, it is a question of stopping for a moment and reflecting on whether the supplier portfolio is being managed in the most appropriate way which, in this case, will also be the most productive way. There are five essential points to stop and consider, with a view to the future:

1.- Determine the selection criteria to be followed and its focus, for example, the aspect that has carried the most weight in the selection, from the quality to the price, and from the supplier's reputation, which is an objective fact, to the purchasing team's fear of missing out on the latest market developments, which is the exact opposite, as it makes the contact list grow and become more of a burden than a valuable management tool.

2.- Establish the type of management that you want to exist between the company and the suppliers. If it is to be personalised, it will be necessary to analyse whether or not there is the capacity for this, or if the unwieldy contact list, full of "just in case" suppliers, is going to become an obstacle.

3.- Check the advantages that the suppliers offer, in addition to the DIY product itself. Advantages, for example, such as presentations, exhibition or promotional material.

4.- Consider the chosen suppliers’ capacity for innovation and their short or long-term nature. Working with an innovative supplier who periodically offers you new products is not the same as working with one who consistently favours the status quo and ends up becoming monotonous.

5.- Prioritise the issue of trust. If suppliers are found to be reliable in terms of the basic aspects of quality, innovation and service, give them the position that they deserve.

A good team needs the right substitutes, but it can do without unnecessary benches.

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